How Hedge Funds Help Bitcoin to Reach New Heights

There is a growing wave of Wall Street interest in Bitcoin, and it predicated on hedge funds.

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Smart Investment

While there may be a major Wall Street divide when it comes to Bitcoin, there is no doubting the role that the institutionalized money movers and investors have had in helping drive the price of the digital currency up.

Fueling the fire

There have been a number of contributing factors that have seen Bitcoin jump over 600 percent in the year to date, from differing regulations and softening approaches from certain nations to changes in the software and the mainstream hype. However, a lot of the money coming in has come from Wall Street.

CME’s influence

Another big step for Bitcoin’s legitimacy with the money-rich investment bankers was when Chicago Mercantile Exchange announced last week that it would launch a Bitcoin futures contract in the next few months.

Large portion of business

Bobby Cho, the head trader at one a large Bitcoin trading businesses, Cumberland, said that after years of hesitancy, institutional investors now accounted for most of his business.

“The vast majority of the trading we do is with institutions,” Cho said. “The education and research have turned into real-life activity.”

Kevin Zhou, a co-founder of the trading firm Galois Capital, said that hedge funds were more likely than small investors to pull out a lot of money at once and that Bitcoin was still small enough that a single fund’s cashing out could cause the price to drop sharply.

“You could get a possible run on the bank if one large investor withdraws and that causes the price to tank,” said Zhou. “That could cause a cascade of withdrawals.”